December 2015 Newsletter

Because Justin Trudeau’s Liberals were elected with a clear majority in the House of Commons on October 19, 2015, they have the ability to pass any legislation they wish (subject to approval by the Senate).

In their election platform, the Liberals proposed a number of specific tax changes. We can expect to see at least some of these introduced in Parliament in the new government’s first Budget, likely early in 2016.

If you start a new business (whether personally or in a corporation), you might be claiming GST/HST input tax credits (ITCs) to recover GST or HST that the business pays on purchases.

If you are not collecting and remitting GST or HST that exceeds these ITCs, then you will be claiming a “net tax refund” — in other words, asking the CRA (or Revenu Québec, in Quebec) to write your business a cheque.

There is nothing wrong with claiming a net tax refund, provided the business is entitled to one. Be aware, however, that claiming a refund that exceeds a basic threshold (rumoured to be $2,500, but it may vary) will trigger a CRA audit. You will get a letter from a “GST/HST Refund Integrity Officer” seeking invoices documenting the GST or HST that you have paid, as well as an explanation as to why you have not collected GST or HST on sales.

Because 2016 is a leap year, some deadlines fall earlier this coming year than normal.

If you will be filing a T3 trust tax return, the deadline (assuming a calendar year-end for the trust) is 90 days after the end of the year. Normally that is March 31. This year, because February has 29 days, the 90-day period expires on Wednesday March 30.

A T3 return filed on March 31 will be late. If the return contains any election or designation that has to be filed by the return’s due date, and the return is not filed by March 30, the election or designation will not have been properly made!

Tax planning sometimes goes wrong.

Transactions executed for tax purposes often involve corporate reorganizations, contracts, issuing new classes of shares, mergers, transfers, etc. What happens if someone forgets to sign the right document, or the lawyers do not draft the right documents to make the transaction work?

Or worse yet, what happens if you or your corporation engage in some transaction, such as a real estate deal, setting up a trust, or a transfer of property within a family group, and aren’t properly advised about the tax consequences, and a huge tax problem results?

Most charities rely primarily on donations for their revenues. However, charities increasingly run events for fund-raising purposes — everything from dinners to golf tournaments to bike races to flea markets.

In some cases, a charity needs to charge GST or HST on its fees (or “tickets”) to such events.

This article provides a summary as to when charity events or tickets are likely to be taxable. It is only a general summary. A charity that has any uncertainty about this issue should consult a tax professional with GST/HST expertise.

Inflated receipts for charitable donations — No donation allowed at all

Canada’s charitable donation credits for individuals are generous. In many provinces the total of federal and provincial credits approaches or equals 50% of the amount of the donation. While this promotes philanthropy, it has also led to abuse.

The recent Castro decision of the Federal Court of Appeal is an appeal of several Tax Court of Canada decisions on such fraudulent donations. In a typical case, the taxpayer would donate $1,000 and received a tax receipt showing he had donated $10,000. The Tax Court disallowed the $10,000 as a donation, but did allow a credit on $1,000, the actual cash donated to the charity.